"We deliver respect and results"

At its 2011 Annual General Meeting, Deutsche Post DHL Group looks back on a successful financial year and regards itself as well positioned for the future. In an interview with Deutsche Post DHL News, CEO Frank Appel explains the reasons for the Group's good performance, its growth plans for the coming years and its high level of corporate responsibility.

CEO Frank Appel

Mr. Appel, today you are going to meet with your shareholders and report on the past financial year. What kind of balance are you drawing?

Frank Appel: A positive one, across the board. The Group is very well positioned. The restructuring measures of the past years are showing good results and our Strategy 2015 is taking effect. As the world's largest logistics provider, we are very strongly benefiting from the ongoing positive growth of the global economy because we positioned ourselves at an early stage to be fit for the upswing. The results demonstrate this too: We either reached or even exceeded all our targets in 2010. We achieved a double-digit revenue increase and are clearly back above the EUR50 billion mark again. We had already raised our guidance for the company's operating profit twice during the year - and still exceeded the upper target corridor in the end.

On the whole, all our key financial figures were back at the highest levels that we saw in the period before the major economic and financial crisis, and some of them were even higher. Likewise, we achieved a dynamic start to the current financial year: with the results of the first three months of 2011, we have laid an excellent foundation for achieving our targets for the year. Revenues rose significantly, and our profitability has taken a huge leap forward. All in all, there is certainly good reason to be pleased.

What will the shareholders get out of this?

We ensure that our shareholders - and our employees as well - benefit in an adequate way from the Group's success. In light of the excellent results of the past financial year, and because we are convinced we will be able to maintain the Group's positive growth, we are proposing a dividend of EUR0.65 per share to the Annual General Meeting. This represents an increase of EUR0.05 per share compared with the previous financial year. At 59 percent, the payout ratio is right within the target corridor of 40 percent to 60 percent of net profit that our long-term finance strategy foresees for future dividend payouts. Based on the year-end closing price of our share, this corresponds to a very impressive dividend yield of 5.1 percent.

Over the medium term, our investors will profit from the Group's extraordinarily strong growth prospects, a view that notably also independent analysts now agree on. And in the long term, our shareholders will benefit from our new finance strategy that was released last year. It aims to ensure a high level of continuity, reliability and predictability for our investors.

What role is the Strategy 2015 playing in this respect?

With our Strategy 2015, which we presented to the public two years ago and are systematically implementing within the company, we charted the right course at an early stage to be able to profit strongly - and, in particular, in a sustainable way - from the global economy's growth. It is not about reinventing the Group. Instead, we are working to further develop the company from the inside out so we can be even better prepared for the challenges of the future and the volatility of the markets.

What does that mean in terms of the Group's mid-range targets?

We are now fully geared for growth. Our targets are clear: we want to significantly improve revenue and earnings in the coming years in order to reach a leading position in our industry in terms of profitability, too. Specifically, we aim to generate average yearly growth of between 13% and 15% in operative earnings in the DHL divisions through 2015. In the MAIL division, we aim to stabilize the operating profit at a level of around EUR1 billion.

As a result, Deutsche Post DHL will stand on two strong pillars: Deutsche Post and DHL. We aim to be more effective, more efficient and more innovative than others, because these actions will create the foundation for being the first choice for our customers, employees and shareholders. With Strategy 2015, we have charted a clear course for our future development and have already made significant progress on this path.

How do you intend to achieve the stabilization of the traditional letter business?

Of course, in this division we can see far-reaching structural changes that relate to electronic forms of communication. We have reacted to this with a range of e-products, such as the E-Postbrief. Such products are only one element of our strategy to offer innovative solutions in digital and traditional physical communications and, with this approach, to permanently defend our position as THE postal service for Germany. Moreover, one fact is frequently overlooked: we are also one of the big winners of the e-commerce boom because of the strong growth we have achieved in our parcel business. The parcel business now already accounts for around one-fifth of the MAIL division's total revenue and these revenues are seeing highly dynamic growth: 9 percent in the first three months of 2011 alone.

Like I said, we have set ourselves a target of achieving underlying EBIT of around EUR1 billion in the MAIL division. We need this amount to be able to make the necessary investments in an efficient network. The dynamic parcel business will contribute to this goal and help us to achieve it. The extent to which the traditional letter business will be in a position to contribute will depend on a number of external factors that we are unable to influence.

I presume you are referring here to the procedure for setting the price of letters?

This is definitely one important aspect. Consider this: the price for sending a standard letter in Germany has not been raised for 14 years. Our prices are low in European comparison - although the quality of service is extremely high. At the same time, earnings in the letter business have almost halved within only three years.

The discussion about a possible increase in the price of a letter, then, is not about maximizing our profit, but rather about maintaining the current status and a good infrastructure. At the end of the day, the Federal Network Agency will not only be deciding the future procedure for setting letter prices. In fact, it will also be part of the decision on whether or not Germany will still have a modern and efficient postal network in ten years.

This means your second pillar - DHL - will become increasingly important for the company. What do you have to report concerning this division?

Over the past financial year, DHL has, as planned, developed into the growth driver within the Group. One reason for this is our excellent position in all growth markets worldwide. In Asia, for example, we invested more than US$ 2 billion over the past years and are today the clear market leader in this region in all DHL divisions. This is also reflected in the figures: revenue in the region expanded by 36 percent in the past financial year.

We see enormous potential for organic growth at DHL, and we aim to use that by working even harder to achieve integrated solutions for our customers' specific requirements - for example, with specialized technologies that continuously monitor and control compliance with specific temperature requirements during the entire transport process, thus ensuring a fully temperature-controlled supply chain. Or, with our City Logistics concepts: they aim to reduce traffic in downtown areas of cities using more efficient transport systems, thus also reducing CO2 emissions.

Reducing CO2 emissions is one of Deutsche Post DHL's stated goals. What has been achieved to date?

We were the first global logistics provider to have set a quantitative CO2 efficiency target for itself. The stated goal is to improve CO2 efficiency by 30 percent over 2007 levels by 2020. One of our stated interim targets was to reach a 10 percent reduction in our own emissions by 2012. We are proud to say we have now already achieved and even exceeded this interim target that was originally planned for next year. This achievement, a result of our continuous optimization of our fleets and network, improvements in the energy efficiency of our buildings and the introduction of innovative technologies, naturally motivates us to achieve even more.

In addition, we transported more than 1.7 billion GoGreen shipments worldwide during the past year. And from July 1, we will be the first logistics company to ship all private-customer parcels in Germany in a carbon-neutral way - at no additional cost to the shipper. For each of these parcels or small packages we ship we will make a contribution to climate-protection projects and offset the CO2- emissions that arise from the transportation and parcel processing.

Then GoGreen is not just an ecological fig leaf?

Quite the opposite: GoGreen is the best example of our goal to deliver respect and results at the same time. Corporate responsibility is an integral part of our Strategy 2015. As a leader in global logistics, we want and have to actively contribute to a sustainable business and economic development. Yet our ecological and social involvement is not purely altruistic, but also allows us to tap new business opportunities. The trend is clear: 57 percent of our commercial customers who responded to a survey we carried out last year will favor a logistics provider with "green" transport solutions over a cheaper competitor in the next ten years. In Asia, this share was as high as 80 percent.

So sustainable business and economic development does not stop at ecology?

That is correct. Sustainability always considers the benefit to society, too. This benefit is the driving force behind the two other parts of our 'Living Responsibility' strategy: GoTeach, our education initiative that we further expanded last year through our partnership with the international organization Teach For All, and our GoHelp initiative, where our teams handled a total of about 7,000 tons of relief supplies in 2010 following the major earthquakes in Haiti and Chile as well as the devastating floods in Guatemala and Pakistan.

I am convinced that 'Living Responsibility' also has an effect on our Group's success. Only those who succeed in being the first choice for customers and employees - and this explicitly includes taking on social responsibility in the context of ones corporate activities - will be able to achieve the economic performance over the long term that will also make them the first choice for investors.

The Group is firmly rooted with both feet in society. Is that the formula for success to achieve future growth?

I am convinced that we will continue to outgrow our market over the medium term too, as long as we set our sights on the key drivers of our business success: satisfied customers, dedicated employees and loyal investors. Then - and only then - will we also be able to gradually succeed in fully unlocking the enormous potential of this huge Group.

Logistics involves the process of planning, implementing and controlling the most efficient and cost-effective flow and storage of goods, including raw materials, in-process stocks, finished goods and related information. Transportation is effected on behalf of the customer from the point of origin to the point of consumption. Essentially, it is the science and art of ensuring that the right products reach the right place in the right condition and the right quantity at the right time at the minimum possible cost.